For Tax Purposes, We Are All Americans

There's an interesting article in today's New York Times that argues that US taxation of non-residents is in violation of the First Protocol of the European Convention on Human Rights:

http://www.nytimes.com/2011/10/07/opinion/07iht-edsokol07.html?_r=1

Interesting isn't it-- how one of the main reasons colonists went to war and declared themselves independent from the UK was due to taxation without representation in parliament.

...But that this "No Taxation without Representation" doesn't actually apply to US citizens living abroad.  You would have thought our government would be careful to repeat history on this one, no?

I think the "No taxation without representation" principle doesn't really work. Millions of Americans don't pay federal taxes but they can vote while millions of US permanent residents do pay taxes but can't vote. And what about DC? Overseas Americans can vote (although it's tricky in practice and we are too diverse and dispersed to have any influence).

It makes far more sense to link taxation to residence rather than citizenship.

A message from a US ambassador:

Uncle Sam will likely show some leniency for U.S. citizens living in Canada who were not aware they were supposed to file returns south of the border, Washington's ambassador to Canada said Tuesday.

"My message on this one is to sit tight. We are not unreasonable. We are not unsympathetic. We are not irresponsible," David Jacobson said during a speech to the Canadian Club in Ottawa.

See

http://www.cbc.ca/news/canada/story/2011/10/18/taxes-us-citizens-canada.html

"My message on this one is to sit tight. We are not unreasonable. We are not unsympathetic. We are not irresponsible," David Jacobson said during a speech to the Canadian Club in Ottawa.

Thanks for posting this. After reading the article, it's still unclear how the implications for 'U.S. Persons' in Canada will be eased, and what the first sentence in the above quote really means.

But, it appears the fuss that's been raised in Canada is getting some attention 'Due South'.

Very interesting, I've been curious about this now that I am pregnant and about to move back to the UK.

It's bad enough that my husband makes an informed choice to leave and has to deal with filing returns every year, just feels really odd that our son is going to be cursed with the same thing through no other reason that his Dad was American.

We will be taking him to the States to visit his grandparents etc so we are going to have to get his American passport.

Very interesting, I've been curious about this now that I am pregnant and about to move back to the UK.

It's bad enough that my husband makes an informed choice to leave and has to deal with filing returns every year, just feels really odd that our son is going to be cursed with the same thing through no other reason that his Dad was American.

We will be taking him to the States to visit his grandparents etc so we are going to have to get his American passport.

Even if you didn't get him a US passport, he would still be a US citizen and obligated to file every year.

Even if you didn't get him a US passport, he would still be a US citizen and obligated to file every year.

...and have the inalienable rights to life liberty and the pursuit of happiness!

Honestly, it's a sucky requirement on the part of the US government but I don't see it as that big of a deal. For most people, who make an average or above average but not stratospheric living, it's just paperwork. Especially for someone who lives in a country like the UK where tax rates are higher than the US and that has a tax treaty with the US that precludes double taxation, it's an annoyance but it doesn't mean more taxes. And, it is not taxation without representation--overseas citizens retain the right to vote in national elections, for President, for the House and the Senate in their last state of residence. If, god forbid, something were to happen that required me to seek consular services overseas, I'm sure I'll be happy to have those available to me and they have to be funded somehow. Yes, it's an extra annoyance for US citizens born abroad who may never live in the US but if they're aware of the requirement from a young age and file as they should, there really should be no problems down the road.

Now, individual STATES trying to tax overseas citizens who are clearly no longer residents of that state because of the difficult to nail down idea of "domicile," THAT bothers me. Aside from maybe retaining a driver's license, there's not much that the state government will do for me overseas AND there's no right for overseas residents to vote in state or local level elections.

True, my comment re the passport was that he will very much be 'in the system' because of that.

My problem is not really based on what it is like today, what is it going to be like in 18 years when it will actually affect him. What if those tax treaties change?

I still think he shouldn't have to file a damn thing if he has never lived in the USA. Once you have lived and worked there then fine, annoying, but I can live with that. Maybe articles like this will get something changed but I somehow doubt that very much. I can simply be glad I never pursued my citizenship. Sadly I had better things to spend $700 on.

We cannot expect the benefits of citizenship of ANY country without expecting to follow the rule of law, and as has been said, filing a tax return is mostly just annoying paperwork.

My husband's miniscule OAP (£57 per week) was taxable income in the US, and we reported it and paid the tax. He worked for 37 quarters in the US, before being retired at 70+ ..... yet because he worked and paid into the US system <40 quarters, he is not entitled to one penny of social security benefit. Not 'fair' perhaps, but that's the law.

If tax liability was based solely on residence, then the 'rich' would promptly domicile themselves elsewhere and pay nothing to the US or the UK, and we in the middle class would shoulder an even greater burden.

Don't fall for the 'violation of human rights' malarkey any more than some of the other oddball reasons people give for their claim of taxes being illegal, unjust etc. I hate paying taxes, and I endeavor to reduce my liability by all legal means. However, I do NOT cheat, and I DO file. It is my responsibility.

So ends the sermon of the day......

My husband's miniscule OAP (£57 per week) was taxable income in the US, and we reported it and paid the tax. He worked for 37 quarters in the US, before being retired at 70+ ..... yet because he worked and paid into the US system <40 quarters, he is not entitled to one penny of social security benefit. Not 'fair' perhaps, but that's the law.

Hi Vadio,

I am somewhat surprised by your comment. Is the £57/week a result of your husband's working in the UK and contributing to NI? If so, and if he has 37 qualifying quarters in the US, he IS entitled to Social Security benefits based on those quarters. Also, any tax due to the US should have been offset by any taxes paid to the UK (and key perhaps, IF he paid tax on the income in the UK because it was above his personal allowance. The higher UK personal allowance can cause some US taxpaying retirees to owe the IRS, but not HMRC.).

Don't fall for the 'violation of human rights' malarkey any more than some of the other oddball reasons people give for their claim of taxes being illegal, unjust etc. I hate paying taxes, and I endeavor to reduce my liability by all legal means. However, I do NOT cheat, and I DO file. It is my responsibility.

So ends the sermon of the day......

Taxation is the price of civilization.

Sure taxation is necessary and I've no problem with paying my UK taxes. The message seems to have been lost on onshore Americans who want services but don't want to pay for them (and the politicians that encourage them). Now the IRS is rooting around in the back of the couch looking for spare change from expats in a futile attempt to make up the difference.

While we're at it:

1) The "It's the law" argument. Sure it's the law but it's a bad one. Black people can vote and we can drink beer thanks to getting to rid of other bad laws.

2) The "It's not much trouble" argument. It depends on your situation. If you start trying to save for retirement or start a small business, you'll find it's a lot more trouble.

3) The consular services argument. This is pretty minor. It would be nice to call in an A10 strike on the parking warden but alas it doesn't work that way.

4) The "rich people won't have to pay" argument. Nobody moves to the UK for the low taxes.

The ironic thing is that the IRS has actually been sending me money due to various credits and stimuli. The whole thing makes no sense.

If the Vadio post is an honest post (not trolling), and Vadio can rightfully disagree with the following statement, I find it also ironic that someone can make a sincere and heartfelt post defending a system, and then discover that they may in fact have been left short due to the complexity inherent in both the Social Security system and the US tax system (Form 8833 in this case).